Seven lean years after his last completed film, director TERRY GILLIAM is in fighting form with two visionary new works

The Grimm Brothers, Will (Matt Damon) and Jacob (Heath Ledger), have built a nice reputation as the ghostbusters of rural Germany circa 1812. Visiting a town that thinks itself in the thrall of some evil creature, the Grimms exorcise the demon, take the money and run. Their supernal powers are all trickery, of course--trapdoors and specters on a stick--but it's a good show. Then they come to a village where the mysteries can't be so easily explained away. Little girls vanish in the forest; trees tiptoe like goblins; a horse devours a child; a wolf can fly. In their newfound terror, the brothers learn a lesson about art and life: there are special effects--and then there is magic.

Terry Gilliam is like the Grimm brothers: he knows all the tricks of the movie fantast's trade, but what he's after is magic. He wants to make pictures that cast spells, that turn today's jaded viewer back into a kid, gawking with wonder. He hopes The Brothers Grimm, which opens Aug. 26, is one of those mesmerizing experiences: "It may not be the deepest film I ever made, but I do think there's real enchantment in it."

Film enchantment, of a baroque species that mixes the sordid with the soaring, is Gilliam's specialty--that, and making movies with big ideas and impossibly spectacular imagery. At times his films become missions impossible. The Spanish shoot of his epic The Man Who Killed Don Quixote, with Johnny Depp and Jean Rochefort, was so plagued by calamities that the only productive thing to come out of it was the disaster-movie documentary Lost in La Mancha. So many other projects have stalled that, at 64, Gilliam has joined the ranks of such hard-luck masters as Orson Welles and Erich von Stroheim. He's as famous for the movies he hasn't finished as for the ones he has.

But the nightmare fantasy that is a Terry Gilliam movie usually allows for a happy ending. Right now the director may have two things to smile about. The $80 million Brothers Grimm, his most accessible, entertaining movie yet, is coming out in Gilliam's director's cut. Two weeks later the more intimate, $15 million Tideland, based on Mitch Cullin's 2000 novel about a lonely child who talks to Barbie-doll heads, will premiere at the Toronto Film Festival. The man who some thought would never make another movie has fooled them, twice.

Not that he has made it easy on himself. When Gilliam meets the moguls to pitch a new project, he wears the albatross of his lost films on one shoulder--and a grudge on the other. "I think I've got a certain talent," he says, "and I don't know how to defend it. So I end up defending it more vociferously than it may need, but I always feel under threat. It's a basic in-built paranoia. When people start interfering, I go a little bit crazy."